Wang, H. & Hanna, S. (1997) Does risk tolerance decrease with age? Financial Counseling and Planning, 8(2), 27-31.

Wang, H. & Hanna, S. (1997). Does risk tolerance decrease with age? Financial Counseling and Planning, 8(2), 27-31.

Does Risk Tolerance Decrease With Age?

Hui Wang⁽¹⁾ and Sherman Hanna⁽²⁾

This study examines the effect of age on risk tolerance. The life-cycle investment hypothesis is tested using the 1983-89 panel of the Survey of Consumer Finances. Household wealth is defined as the sum of human capital and net worth. Risk tolerance is measured by the ratio of risky assets to total wealth. Risk tolerance increases with age when other variables are controlled.

Key Words: Risk tolerance, Risk aversion, Investment, Survey of Consumer Finances

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1. Hui Wang, Statistical Analyst with Milliken and Co. in South Carolina. E-mail: michelle_wang@milliken.com

2. Sherman Hanna, Professor, Consumer and Texile Sciences Department, The Ohio State University, 1787 Neil Ave., Columbus, OH 43210-1295. Phone: (614) 292-4584. FAX: (614) 292-7536. E-mail: hanna.1@osu.edu

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